Silver: Will The Longest Bullish Reversal In History Break Out In 2022?
In doing our research for our silver forecast 2022 we were once again confronted with this insanely powerful long-term silver chart. It is a matter of time until silver (SLV) will break out, it might take many months, maybe even more than a year. But whenever bullish momentum kicks in silver will be unstoppable. The first bull run could and should start in 2022 is what we are thinking.
Image Source: Pixabay
In writing our precious metals outlook we started with our gold forecast 2022 (you can read the summary in this TalkMarket post 3 Reasons Why Gold Will Be Shining Soon). That’s because gold tends to lead silver higher at any point in time with the exception of the last phase of secular bull markets (think 1979 and 2011).
In other words, until precious metals start their parabolic rise (last phase of this precious metals bull market that started in the summer of 2019) we have to think of gold as a leading indicator for silver.
We expect gold to perform well in 2022. Bullish momentum is expected to kick in when the Euro will start rising and when bond yields will be flat or declining.
That’s also when silver will be rising.
That said, we would summarize our silver prediction for 2022 as follows:
“Provided the Euro resumes its uptrend and clears 115 points we see silver moving to 34.70 USD (with bullish momentum it could extend its rise to 40.70 USD).”
Needless to say, any black swan event can derail this forecast. And that’s not just our forecast, a black swan event like the Corona crash last year will invalidate any forecast from any analyst.
Silver indicator: the silver chart with the longest and strongest bullish reversal ever
Although we work with several leading silver price indicators in our methodology we always ‘start with the chart’.
The longest timeframe of the silver chart, the quarterly on 50 years, is the one silver chart that truly stands out.
(Click on image to enlarge)
Silver has a beautiful, rounded reversal pattern. What makes this chart so special and unique is the length and the accuracy of the chart pattern.
We recently explained that beauty results in profitable investments. In essence, our theory behind this statement is that beauty matters in all areas of life. Everyone loves beauty, regardless whether it is highly subjective. Humans tend to look for beauty when buying clothes, a new car, their home, travel, etc. Our point of view is that beauty matters even more in financial markets. Humans should not make an exception in their search for beauty when picking their next investment or deciding on holding an investment.
What does beauty mean when it comes to financial markets? It is the chart pattern, the chart structure, the chart setup. It’s as simple as can be, yet many investors get distracted by gurus, technical indicators, narratives, and forget to check the beauty in the chart as the most important condition to initiate an investment.
What does this mean for silver?
It is a matter of time until this long and powerful bullish reversal will do what it is preparing for a few decades: break out to new ATH.
The power behind a reversal tends to be a function of the length but also its orderly character. The longer and cleaner a chart setup, the more energy is gathers. The long-term silver chart is insanely powerful provided it continues to strengthen and respect key support levels.
Silver indicator: the Euro has to clear 114-115 points
Silver requires a strong Euro in order to create bullish momentum.
The long-term Euro chart could be near support. The 110- 112 area is expected to hold, according to us. Let’s put it differently: silver requires the Euro to print a (double) bottom in the 110-112 area and start rising. Once the Euro is able to clear 114-115 points, after its (double) bottom, it should support precious metals.
(Click on image to enlarge)
We have to add one additional condition to this: bond yields should not be rising (certainly not fast) at that point in time. So, a rising Euro with flat or falling bond yields is what silver needs to start shining.
Timing the big silver breakout: 3 month cycles
“Timing is not the most important thing, it is the only thing.”
Everything we said so far is important, but not as important as the timing of the big silver breakout.
How to go about this?
Very simple, silver moves in cycles of 3 months. It is crucial to ‘identify’ those 3 month cycles and look for pre momentum signals. One such sign is the orderly ‘structure’ of the chart.
The rationale is simple: bullish momentum can only start once sellers give up. This comes with smaller daily candles, smaller wicks, a more orderly chart structure.
As a reference, this is the looking of the daily silver chart with its 3 month cycles right before the historic bull run in 2010 started:
(Click on image to enlarge)
Fast forward to today, this is the daily silver chart with the current cycles. We did extend the cycles to the end of 2022 to make this an easy-to-use chart for TalkMarkets readers:
(Click on image to enlarge)
Conclusion: when will silver finally start shining?
All we have to do in 2022 is wait until the market creates the setup that is described in this article: intermarket Euro and bond yields, combined with silver cycles.
As said in our silver forecast we require a few conditions in 2022 for silver to move to our first target of 34.70 USD (price run can each reach 40.70 USD in the same bull run):
- The Euro has to be rising. Ideally, it prints a double bottom in the 112 area.
- Bond yields must be flat or falling.
- Net positions in the silver futures market should fall to multi-year low levels and should not be rising fast as silver starts rising (whenever that moment will be).
Moreover, the daily silver chart needs to be smooth, less volatile. It will signal that tension is making place for control (by bulls).
We don’t want to miss the first silver bull run to 34 and/or 40, because it will set the stage for a major breakout to new ATH in 2022 or in 2023.
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